Audit Committee Composition Research Articles

Manajemen Laba Perbankan (Studi Pada Bank Terdaftar di Bursa Efek Indonesia Periode 2010-2012)

The objective of this research was to examine the influence of several corporate governance mechanisms, such as board of independent commissioners composition and size of audit committee, firm size, and information asymmetric on the indication of earnings management practice in public bank companies listed in Indonesia Stock Exchange. The sample of this research is all of public bank companies existed in Indonesia in the year 2010-2012. This research used purposive sampling to determine sample. Total sample for this research is 25 public bank companies. This research used multiple regression. The result shows that board of independent commissioners had a negative effect to earning management; size of audit committee had not significant to earning management; firm size had not significant to earning management; information asymmetric had a negative effect to earning management

Corporate Governance and Return on Equity Evidence from Pakistan Stock Exchange

The main purpose of this paper is to study whether corporate governance aspects like board size, audit committee and board composition affect the return on equity (performance) of companies listed on Pakistan Stock Exchange. The data were gathered by purposive sampling techniques from the Balance Sheet Analysis report available on the State Bank of Pakistan website and relevant companies’ websites. A regression model was incorporated to measure the available data for a sample of 50 firms, with a total of 150 years of observations for a period of 2013 -2015. The empirical results indicate that board size, audit committee and board composition are positively associated to return on equity. The result of this study suggests that each organization needs to develop good corporate practices to significantly improve the shareholder wealth in the form of return on equity. The selected sample is taken from non-financial firms with a small sample size, therefore, in future for more generalizability of the results a study may be undertaken to consider financial and non- financial firms with a large sample size.

Impact of audit committee attributes on financial distress: Evidence from Pakistan

This research study compares the financially distressed and financially healthy companies, based on their audit committee attributes over the 2006–2010 period. While focusing on the manufacturing sector of Pakistan, the logit regression results reveal that audit committee composition and audit committee opinion have significant impact on the financial distress of the companies while audit committee size has insignificant impact on financial distress. The first of its kind, this study, benefits investors, financial analysts, accounting professionals, and practitioners. Their decision-making process will be enhanced regarding the evaluation of financially distressed companies and financially healthy ones. Despite its limitations, this study fills up the literature gap by focusing on the financially distressed firms that have not yet been bankrupted, thus giving them a chance to restructure their policies regarding the implementation of corporate governance practices in the context of Pakistan. This study has ignored financial sector of Pakistan because of different reporting styles of financial firms. The periods before and after the period of financial distress have also been ignored in the study.

How Audit Committee Chairs Address Information-Processing Barriers

ABTRACTThis study investigates the way that experienced audit committee Chairs address barriers to effective performance. We conceptualize audit committees as groups of individuals gathering, elaborating, and sharing information, and identify key group barriers to effective audit committee oversight. Drawing on 24 interviews with audit committee Chairs from leading Australian-listed companies, we provide new evidence of the approaches used in practice to address information-processing barriers faced by audit committees. Specifically, we identify six key mechanisms: (1) audit committee composition; (2) pre-meetings; (3) handling of disagreements between management and auditors; (4) formal audit committee meeting facilitation; (5) promoting audit committee skepticism; and (6) external auditor selection. Our findings provide insights for audit committee members, audit partners, and policy-makers as they aim to improve financial reporting and audit quality. These findings also have important implications for research designs of future experimental research.

PENGARUH MEKANISME GOOD CORPORATE GOVERNANCE PADA PENGUNGKAPAN TANGGUNG JAWAB SOSIAL PERUSAHAAN YANG TERGABUNG DALAM INDEKS KOMPAS 100

<em>The purpose of this study was to analyze the influence of good corporate governance mechanisms through the composition of the independent board, independent audit committee composition, public ownership and management ownership, on the disclosure of social responsibility (CSRI). This study also uses a variable sized firms, leverage and profitability as control variables. The population used a company registered in the Kompas 100 Index period in 2014. The sample was taken by purposive sampling method, as many as 72 companies. Statistical testing method using multiple linear regression analysis, the statistical test of hypothesis testing and statistical test t F. The analysis showed that the composition of the independent board, independent audit committee composition and size significantly influence the company's CSR disclosure.</em>

Pengaruh Mekanisme Good Corporate Governance pada Pengungkapan Tanggung Jawab Sosial Perusahaan Yang Tergabung Dalam Indeks Kompas 100.

The purpose of this study was to analyze the effect, good corporate governance mechanism through the composition of the independent board, independent audit committee composition and public ownership, on the disclosure of social responsibility (CSRI). This study also uses a variable sized firms, leverage and profitability as the control variables. The population used a company registered in the Kompas Index 100 period in 2017. The sample was taken by purposive sampling method, and which meet the criteria of sample selection. The samples used were 81 companies. Data collected through secondary data in the form of annual reports published in the period 2017 Indonesian Stock Exchange in 2018. Statistical testing method using multiple linear regression analysis, the statistical test of hypothesis testing and statistical test t F. The results of the analysis based on the use of all the independent variables and the control variables show that only the composition of the independent board and size significantly influence the company's CSR disclosure. Key words: Corporate Social Responsibility; Good Corporate Governance Mechanism; Company Size, Leverage, Profitability

Beneish Model, Corporate Governance and Financial Statements Manipulation

This paper examined corporate governance and financial statements manipulation in Nigeria, using the Beneish model. To this end, the Beneish Model was employed to predict the likelihood of financial statements manipulation among the companies in Nigeria while the role of corporate governance variables to this manipulation was examined, using logistic regression analysis. In specific terms, the corporate governance variables of Board Composition , Board Gender Composition , Audit Committee Composition, and Board Dominance were examined as determinants. The data used were extracted from sixty-five (65) quoted companies in the Nigeria Stock Exchange for a 6-year period of 2009-2014.This period a near-crash in the Nigerian stock market with the consequential low ebb in economic activities in Nigeria. Preliminary analysis reveals that most of the companies quoted in the Nigeria Stock Exchange and sampled for this study, based on the Beneish Model, have the probability of manipulating their annual financial statements. Furthermore, results revealed that an increase in the Board Composition defined in the proportion of the Non-Executive Director (NED) on the Board, will increase the likelihood of detecting, preventing and investigating financial statements manipulation in the quoted companies in Nigeria. In addition, it was discovered that, in the Board Gender Composition, an increase in the proportion of female gender in the entire board will increase the likelihood of detecting, preventing and investigating financial statements manipulation. Meanwhile, it was revealed that an increase in the effectiveness and efficiency of the composition of the audit committee may reduce the likelihood of financial statements manipulation in Nigeria companies. Lastly, it was discovered that a decrease in Board Dominance will increase the likelihood of detecting, preventing and investigating misstatements in the annual financial statements of Nigeria companies. It is recommended.in the meantime, to use the Beneish model as a norm to assess the possibility of financial statements manipulation. More stringent measures, such as whistleblowing, ethics, value system, zero tolerance to fraud, just to mention a few, are to be effectively enforced by external regulatory authorities (such as Central Bank of Nigeria, Securities and Exchange Commission and the Nigerian Stock Exchange) to control the activities of the company’s board of directors, as well as the application of Beneish model, would aid the detection of financial statements manipulation.

Abnormal accounting accrual Management by internal and external Market Discipline: The case of Tunisian banks in the context of the ‘Arab Spring’

Problem/Relevance: This paper deals with such market disciplinary factors as shareholder ownership, audit committee composition and Basel III prudential regulation affecting accounting manipulation measured by abnormal accruals in Tunisian banks in the event of managerial deviation from regulatory requirements Research Objective/Questions : The aim of this study is to estimate the abnormal accruals that measure the accounting manipulation, and to test the effect of disciplinary and regulatory factors accordingly to The spring Arab revolution, on accounting Manipulation. Methodology: We propose to construct abnormal accruals as an endogenous variable, using the classic Kothari model (2005), in order to explain them by means of the “difference-in-difference” estimation approach (DID), understand the significance of the evolution of the manipulation, and explain these accruals using internal and external disciplinary factors. On the other hand, we use the credit risk portfolio manipulation theory advocated by Nessim (2003) and Repullo (2007), to understand the concept of actual venture capital of Tunisian banks after the Arab Revolution. Major Findings : The results show that the situation of Tunisian banks has dramatically worsened since the Tunisian Revolution. The DID approach showed an exacerbation of abnormal accruals and a manipulation transfer from net income smoothing to credit portfolio value smoothing in order to reach a healthy financial situation. This aggravation is linked to the market discipline deterioration, the shareholders, the external auditors and the supervisory board. Implications : Before the Revolution, accounting manipulation was mainly caused by banking undercapitalization that led managers to offer more risky credit in a diluted ownership market and in an informational asymmetry situation characterized by the absence of the audit committee. After the Revolution, accounting manipulation resulted from an overcapitalization situation, which led managers to grant more risky credit. To circumvent the shareholders’ supervisory power, managers manipulated credit portfolio values, offering a low level of credit risk, and circulating false beliefs for shareholders and depositors. This was done when prudential supervision was weak, leading to an information asymmetry and long-term conflict of interest between external auditors and managers through abnormal remuneration and a long relationship.

Insights from an Analysis of Audit Committee Governance Practices at U.S. Registered Investment Companies and Public Operating Companies

Guided by agency theory and institutional theory, we investigate the influence of the unique aspects of investment companies (ICs) on audit committee (AC) governance and compare AC IC and operating company (OC) governance practices. We use a dual-method, three-stage research approach: (1) surveys of 107 IC AC members, (2) interviews of ten AC and ten management members at ICs, and (3) interviews of ten OC AC members and follow-up interviews of the ten IC AC members. Consistent with agency theory, we find IC ACs are substantively engaged in overseeing AC operations quality (AC composition and diligence) and other critical governance areas (auditor hiring/retention, audit process, agenda setting, and critical risks), whereas management is not. In contrast, our findings for OC ACs reveal evidence of both ceremonial oversight (auditor retention/hiring and agenda setting) and substantive oversight (audit process and critical risks). Our study’s findings have important implications for regulators and practitioners.

Corporate governance effects on corporate social responsibility disclosure: empirical evidence from heavy-pollution industries in Iran

PurposeThis paper aims to investigate the relationship between corporate governance (CG) and corporate social responsibility (CSR) disclosure in a sample of 64 companies listed on the Tehran Stock Exchange.Design/methodology/approachThis study opts for a descriptive-correlational method. To measure the extent of CSR disclosure and CG variables, companies’ annual reports and websites during 2014-2015 are content analyzed by applying a 64-item checklist. Boards’ size, age, tenure and independence, CEO duality, audit committee (AC) composition and ownership concentration are considered as CG variables. To ascertain the CG–CSR disclosure relationship, multivariate linear regression analysis is incorporated.FindingsBased on the results, audit committee composition, board tenure and ownership concentration positively influence CSR disclosure level with ownership concentration as the most influential variable, that is, in companies with majority shareholders ownership, managers tend to disclose more CSR information.Research limitations/implicationsOnly annual reports and company websites are analyzed. Researchers are encouraged to apply other methods such as interview and to consider other variables, such as board diversity, proportion of female members and the extent of shareholders activities, to measure CG.Practical implicationsThis paper provides implications at the policy level to identify governance mechanisms to increase CSR awareness of heavy-pollution industries in developing countries.Originality/valueStudies rarely examined CSR reporting in Iran, particularly among heavy-pollution companies. Besides, the paper highlights the role of majority shareholders and non-executive AC members in CSR disclosure.

Analisis Dampak Corporate Governance terhadap Tax avoidance Pada Perusahaan Pertambangan Listed di Bursa Efek Indonesia (BEI)

This research is intended to analyze the influence of corporate governance towards tax avoidance. The method of research is descriptive quantitative. The type of data in this study using secondary data sourced from the company's annual report which is accessible through www.idx.co.id. The population in this research is the mining company listed on the Indonesia stock exchange totaling 41 companies with some specific criteria so as to generate a sample of research a number of 10 companies. The data analysis techniques used to influence corporate governance against tax avoidance is the data panel. Variables used in measuring corporate governance is the composition of the Board of Commissioners are independent, the composition of the audit committee, and the managerial ownership. The results of this study is that the Board of Commissioners of the independent variables are declared to tax avoidance. Furthermore, the audit Committee stated variable effect on tax avoidance. Managerial ownership variables are declared to have no effect against tax avoidance. While Ssimultaneously, corporate governance is declared to tax avoidance. Based on research results, there are still some companies that they do tax avoidance by using measurements of the current etr. Then the management of the company is expected to pay more attention to any action or decision taken with regard to corporate taxes. While the Government is expected to be more rigorous in supervising the company in order for the payment of taxes in accordance with the tax burden thus spared from losses arising from the payment of taxes is not optimal.

Shareholder Activism and Changes in Audit Committee Composition

We examine whether governance related shareholder activism is associated with changes in audit committee composition. Audit committees are the “ultimate monitors” of firms’ financial reporting processes. The SEC is interested in whether audit committees have financial experts and prior research has documented benefits associated with accounting-specific financial expertise. Governance activism expresses investors’ dissatisfaction with corporate governance; audit committees are an important governance mechanism. Therefore, we predict that governance activism will affect audit committee composition. We document consistent associations between both general and accounting related governance activism and increases in audit committee accounting expertise. These associations are strongest when a firm concurrently announces a restatement, experiences an internal control failure, or has low pre-activism expertise. Further, in the post period, there is a considerable drop in activism for firms that have added accounting experts. Our study documents an important determinant of audit committee composition.

English

This study examines the effect of audit quality on share prices of Nigerian oil and gas firms using the regression and covariance analyses. Findings from the regression anlysis suggests that the composition of the audit committee and auditor type has significant effect on the market prices of quoted firms. There is a positive and significant relationship between audit committee composition and share prices. The covariance analysis suggests that while auditor type (BIG4/NONBIG4), auditor independence, and composition of the audit committee have a positive and significant relationship with market price of shares, tenure of external auditors has a negative relationship with the market price of shares. The implication of the findings is that audit quality will enhance reported earnings and hence the share market prices. The study recommends that firms should strive to associate with the BIG4 external auditors in Nigeria as such an association could enhance the credibility of the audit process and by extension their share prices; regulatory authorities should discourage joint audit and non-audit services to firms because it could threaten the independence of external auditors. Regulatory agencies should also present distinct statements on the tenure of the external auditors to be clearly stated in annual reports. This is because a long attachment between the external auditors and a client may threaten the independence of the external auditors. Key words: Share-prices, audit-quality, auditor-independence, auditor-type.

RELATIONSHIP BETWEEN AUDIT COMMITTEE CHARACTERISTICS AND THE AUDIT EXPECTATION GAP WITHIN STATE CORPORATIONS IN KENYA

Purpose: The current study sought to identify the relationship between audit committee characteristics and the audit expectation gap within the public sector in Kenya.Methodology: The study adopted a positivism philosophy and a descriptive research design in solving the research problem. The target population for the research was pooled from audit committee members in all the 119 state parastatals. The study relied on primary data that was collected using semi-structured questionnaires and key informant interview schedules. This was further supplemented using secondary data that was sourced from government reports and published reports. The collected data was analyzed using descriptive and inferential statistics. Statistical tests such as ANOVA and t-test was conducted to help in accepting or rejecting the research hypothesis.Results: The study findings indicated that audit committee composition R2 = .107 and audit committee meetings R2 = .19 had the highest association with audit expectation gap in state corporations.Unique contribution to theory, practice and policy: The study recommends that gender inclusion should be upheld within the public sector and more so within audit committees. Further in constituting audit committees there is need for stakeholders to ensure individual competencies such as technical skills, leadership qualities and integrity are available to help mitigate expectation gap. More so there should be appropriate skill mix within the audit committee which should be regularly assessed to ensure conformity to best standards of practice.

Corporate Governance and Firm Performance: The Role of the Board and Audit Committee

Corporate Governance (CG) has become a paramount issue due to its greater significance of practicing accuracy, maintaining accountability, establishing effective internal control and regulating organizations for achieving organizational goals. The study is conducted to explore the relationship between corporate governance and firm performance with considering the role of board and audit committee. The multiple liner regression analysis is used as the underlying statistical test on the dependent variables, ROA, ROE and TQ to test the association between the independent variables (board size, board independence, size of audit committee and audit committee composition) with firm performance. Homogeneous purposive sampling has been used. The sample size of the study is 81 listed companies in DSE. The results of the study signify that board independence ratio and audit committee is statistically significant and has positive impact on ROA and TQ. But it is not statistically significant in the case of firm performance indicator ROE in this study. In addition to, Board size is not statistically significant and has negative correlation with firm performance due to group dynamics, communication gaps and indecisiveness of larger groups.

The Development of Audit Committees - A Review of the Literature on Theoretical and Global Perspective

The audit committee performs a pivotal role in making the right environment for quality auditing. It is the audit committee's obligation to breed an environment that encompasses an open dialogue in a culture of honesty, regard and transparency amongst management and auditors. The prime purpose of an audit committee is to provide oversight of the financial reporting process, the audit process, the system of internal controls and compliance with laws and regulations. Audit committees will consider internal controls and review their effectiveness. Since 1940, the SEC has acknowledged that an audit committee can serve a significant, and eventually essential, role in guaranteeing that a publically listed corporation financial reporting is correct. In the 1970s, the New York Stock Exchange (NYSE) obligated boards of directors of these listed firms to employ an audit committee. Then in the late 1980s, (Nasdaq) the National Association of Securities Dealers and (AMEX) American Stock Exchange afterward employed the audit committees. Today, innumerable practices and rules command the composition, roles, and duties of audit committees. After the Enron’s collapse, audit committee affiliates duties are enhanced and Securities Exchange Commission are investigating the board of directors and management more and more. This article provides a brief overview of audit committee’s emergence in UK and Saudi Arabia, Moreover theoretical foundations of the audit committees are also discussed.

Audit committee effectiveness and financial reporting timeliness

PurposeThe purpose of this paper is to investigate whether there is any relationship between the effectiveness of an audit committee and the financial reporting timeliness of Tunisian listed companies as proxied by external audit delay (AD). Analysis focuses on five audit committee characteristics: authority, financial expertise, independence, size and diligence.Design/methodology/approachEmpirical tests address 162 firm-year observations drawn from Tunisian listed companies during 2011-2013.FindingsMultivariate analyses indicate that audit committees with members who have financial expertise are significantly associated with shorter AD. Thus, the results suggest that audit committee financial expertise contributes to the improvement of financial statements’ timeliness.Research limitations/implicationsThe audit committee attributes examined in this study were based on DeZoort et al. (2002) framework. There could be other aspects of audit committee effectiveness such as audit committee tenure and audit committee chair characteristics, which were not addressed in the present study. Thus, future research may consider and examine these other components of audit committee effectiveness.Practical implicationsFindings have managerial implications. Companies can re-look into how to further improve audit committee composition in order to enhance the timeliness of financial reporting. The issues of audit committee effectiveness and timely reporting also affect regulators and policy makers since they need to play a role in the establishment of effective audit committees and the improvement of financial reporting timeliness.Originality/valueThis study is one of few that have examined the impact of audit committee effectiveness on ADs in an emerging market country. Findings lend credence to the belief that audit committee members’ financial expertise enhances the quality of financial reporting by firms in a North African market criticized for the lack of maturity of its corporate governance system (Klibi, 2015; Fitch Ratings, 2009).

Resourcing the Internal Audit Function: How Effective is the Audit Committee?

The aim of this study is to investigate the extent to which an Audit Committee (AC)’s own governance characteristics impact on its role effectiveness in achieving enhanced resourcing and by extension, improved the scope and quality of the Internal Audit Function (IAF). Sample is drawn from top 300 companies listed on the Australian Stock Exchange (ASX). This study combines data from a questionnaire administered to the Internal Audit Executive (IAE) with information from annual reports and financial databases. Hypotheses are developed and tested using multiple regression analysis. This analysis is supplemented by insights from a comparative case study for two companies in the sample. Results reveal that AC size is significantly positively related to the financial resources (budget) allocated to IAF, while both AC financial expertise and AC size are significantly positively related to IAF labour hours. Results also confirm that IAF’s with higher resourcing are able to concentrate those resources on areas expected of a high quality IAF. Further, comparative case study analysis gives insights to the superior ways a larger size AC can be effective in fulfilling its oversight role, building its working relationships and obtaining resources for the IAF. Study contributes to current auditing-related governance literature by introducing a comprehensive empirical model of AC effectiveness in facilitating the scope and quality of the IAF’s work. Also, the findings have implications for regulators and the Institute of Internal Auditors (IIA) in terms of the composition and functioning of ACs.

Corporate Reporting Transparency, Board Independence and Expertise, and CEO Duality

Compared to audit committee composition, relatively little research has been devoted to analyzing the role board composition and having one person serve as the CEO and chairman (CEO duality) play in improving corporate reporting transparency. My results indicate that after controlling for audit committee composition, board composition and CEO duality are related to various measures of corporate reporting transparency. I find that greater insider participation on the board (regardless of level of financial expertise) is related to less transparent disclosures, especially those related to board and management structure and processes. Independent directors, particularly those with financial expertise, are related to more transparent disclosures, especially those related to ownership structure and investor rights and board and management structure and processes. Finally, having different people serve as CEO and chairman of the board is not related to greater corporate reporting transparency. These results indicate that limiting insider participation on boards while encouraging the addition of independent financial experts to boards may improve corporate reporting transparency, but splitting the role of CEO and chairman may not.

Did the 1999 NYSE and NASDAQ Listing Standard Changes on Audit Committee Composition Benefit Investors?

ABSTRACT In December 1999, the SEC instituted a new listing standard for NYSE and NASDAQ firms. Listed firms were now required to maintain fully independent audit committees with at least three members. In July 2002, the U.S. Congress legislated these standards through the Sarbanes-Oxley Act. Our research question is whether all investors benefited from the 1999 new rule. Using both an event study and a difference-in-differences methodology, we find no evidence of higher market value or better financial reporting quality resulting from this rule.